SAP at crossroads after verdict

Jordan Robertson Associated Press

Published 12:00 am, Thursday, November 25, 2010

SAN FRANCISCO -- On the losing end of a $1.3 billion jury verdict for stealing a rival's intellectual property, SAP AG is facing the difficult decision about whether to double down -- by appealing -- or folding.

Either route will cost the German company dearly, and will have implications for how other technology companies approach copyrights.

A jury on Tuesday found that SAP's behavior in plundering software and documents from archenemy Oracle Corp.'s secured websites was so egregious that it awarded Oracle nearly all of the damages it was seeking.

If SAP appeals, it will have to endure several more years of disastrous publicity, a jackpot for Oracle.

The judge in the case still has to formally affirm the jury's verdict, and could reduce the award. An order could come sometime in the next week.

Many analysts suspect that SAP will stand down and try and figure out a way to pay one of the biggest software piracy penalties on record.

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Oracle has already reaped a windfall by damaging SAP's reputation, and will likely hammer on the verdict in negotiations to try and steal SAP customers in its quest to dethrone the German company as the world's biggest maker of business applications.

If SAP decides to pay, coming up with the money is going to hurt. The $1.3 billion that the jury awarded Oracle is more than half of SAP's total profit from last year. But Ross MacMillan, an analyst with Jefferies and Co., noted that SAP could easily pay for the verdict with cash on hand. At the end of September, SAP's cash stockpile stood at about $4.1 billion, at current exchange rates.

SAP had set aside just $160 million to pay a judgment against the company, and has already spent $120 million of that paying Oracle's legal fees.

While SAP can decide whether to let the lawsuit die, it's powerless in another key element of the case that has yet to play out: the company has acknowledged an ongoing investigation by the U.S. Department of Justice into the matter, and criminal charges are a possibility.